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The challenge

Qualcomm’s legacy liquidity structure in Asia was decentralised. Given the accelerated growth Qualcomm was experiencing in Asia, Matt Post, Assistant Treasurer in San Diego was eager to enhance the company’s liquidity efficiency by establishing a structure that would:

• Deploy liquidity from markets with surplus cash to markets with deficits.
• Reduce third-party borrowing.
• Automate the mobilisation of surplus cash locally and regionally with minimal human intervention, within the regulatory framework of each country and with minimal FX exposure.
• Facilitate the investment of surplus cash.

The solution

The solution in partnership with Bank of America comprises domestic cash sweeping for local currency and US dollar to optimise yield while reducing related FX cost. A multi-currency notional pool at the regional level so that wherever the regulations allow, the company can concentrate liquidity in a centralised location in its base currency with the benefit of minimising FX costs and maximising yield.

Specifically, for China, by setting up both CNY and US dollar cross-border cash sweeps between China and Singapore, Qualcomm can benefit from different regulatory schemes. Qualcomm can have separate CNY and US dollar cross-border lending and borrowing quotas, giving the company enhanced flexibility when moving funds between China and overseas. The accumulated quota of CNY and US dollar can fully address Qualcomm’s inflow to and outflow from China, seamlessly connecting China liquidity with Singapore and then extending globally.

For regulated countries like Korea, Taiwan, Malaysia and Thailand, the solution incorporates a structure based on a thorough understanding of the regulation as it applies to sweeping of funds in local and foreign currencies.

Leveraging automatic zero-balance domestic sweeps, Qualcomm can centralise surplus cash, gain full transparency and facilitate higher yield. In the case of China, an automatic on-demand structure for the domestic US dollar cash sweep eliminates unnecessary funds movement and minimises the lending and borrowing among Qualcomm subsidiaries.

A pilot was launched in China with two CNY cross-border cash sweeps and two US dollar cross-border cash sweeps simultaneously with one bank.

Qualcomm needed to segregate the liquidity between its controlled foreign company (CFC) and non-CFC subsidiaries due to US tax requirements. An exception from the regulator was obtained to implement the four cross-border cash sweeps with one bank simultaneously. As a result, Qualcomm can not only enhance liquidity management efficiency but also ensure full compliance with local and US policies.

Qualcomm adopted a phased rolled out starting with Singapore and China. During the pilot, Qualcomm managed the cross-border pools on an on-demand basis and instructed the bank to move funds between China and Singapore when needed. This ensured the team is familiar with the platform and understood the procedure to develop the cross-border cash position control mechanism before migrating to a fully automated phase.

Much of this new structure is already implemented and scheduled to go live on a fully automated basis on October 1st 2021.

Best practice and innovation

Qualcomm’s rigorous attention to clarity and detail in articulating its objectives for the Asia liquidity structure paved the way for the successful selection, collaboration, and implementation of the best in class solution. Qualcomm worked with Bank of America to develop solutions to create a centralised, automated, and flexible liquidity management system, leveraging a combination of technological innovation and effective management strategies, while considering the disparate regulatory landscape across Asia.

Key benefits

• Centralised and enhanced regional liquidity management.
• Seamless global connection of Asia liquidity.
• Costs saved.
• Reduced FX administration costs.
• Integrated with Qualcomm’s treasury management system.